Its FTA with China is good for the Maldives

Only days after the Maldives’ new government came to power, it has said it will pull out of a free trade agreement with China because it was a mistake for such a small country to sign such a deal with the world’s second-largest economy.

Mohamed Nasheed, the chief of the Maldivian Democratic Party, which leads the ruling federal alliance, cited the huge trade imbalance between the two countries and called the FTA a “one-way treaty” that only benefits China.

The deal, the first of its kind for the Maldives, was signed during former president Abdulla Yameen’s state visit to Beijing last December after two years of negotiations. It removed the trade barriers between the two countries as it cut the tariffs on more than 95 per cent of goods to zero, and opened up the “world’s largest consumer market” to goods from the Maldives, particularly fishery products, which are its main exports.

It is absurd, and even ill-willed, to suggest a free trade deal with China and participation in the China-led Belt and Road Initiative would push the Maldives into a debt trap. The archipelago of around 1,200 islands has always been dependent on imports, and given the nature of the economy, the country has always maintained a considerable current account deficit with the rest of the world.

China is also the largest source of tourists for the Maldives, with 248,000 Chinese tourists visiting the country in the first 10 months of this year, one-fifth of all foreign visitors it received. The FTA is expected to help the Maldives to meet its goal of increasing tourist arrivals from the current 1.5 million to 7-8 million each year, as restrictions ease for Chinese investors to upgrade its infrastructure to meet surging demand.

The win-win practical cooperation encouraged by the FTA will be a boon for the Maldives’ coffers and consumers and has nothing to do with geopolitics, as some critics have suggested.

Given that after the deal was agreed, the opposition party criticized Yameen sharply for being too “pro-China”, it is not a surprise that the new government in Male is saying it will dump the deal. Yet discontinuity in national policies due to opposition for opposition’s sake or because of the needless concerns of India, which is worried China might establish a naval base in the Maldives in spite of China’s denials, would come at the unnecessarily high cost of its economic interests.